Ray Dalio is the most successful hedge fund manager of all time, according to a recent ranking by LCH Investments.
He runs Bridgewater Associates according to an intense and unusual management philosophy that values “radical transparency.” At the firm’s isolated Westport, Connecticut headquarters, all meetings, interviews, and interviews are recorded and logged.
He demands that no employee withhold criticisms from each other, and encourages anyone to call him out, as well. Employees keep track of these criticisms in a proprietary app called “Pain Button” that they have on their company iPads.
According to a new report by The Wall Street Journal’s Rob Copeland and Bradley Hope, Dalio and co-CEO Greg Jensen are currently at odds with each other after Dalio accused Jensen of lacking “integrity,” which in Bridgewater-speak means a dedication to keeping all criticism public within the company. Dalio is asking management and stakeholder committees if they agree with his assessment that recordings of Jensen at meetings reveal tensions he has with Dalio that he did not say to his face.
Every employee has a copy of Dalio’s exhaustive management guide, “Principles,” which contains 210 lessons. The 2011 edition has been available on Bridgewater’s site for a few years and has been downloaded more than two million times, according to The Journal.
We’ve highlighted 20 of the most representative principles.
'Create an environment in which everyone has the right to understand what makes sense and no one has the right to hold a critical opinion without speaking up about it,' Dalio writes.
He believes that even though the truth can be scary (like when your boss points out one of your flaws), it's necessary for optimum performance. Dalio has actually fired employees for talking behind a coworker's back. 'If you talk behind people's backs at Bridgewater you are called a slimy weasel,' Dalio says.
Dalio believes that managers need to expect mistakes from both their employees and themselves. And analysis of mistakes should be quick and as painless as possible.
'Create an environment in which people understand that remarks such as 'You handled that badly' are meant to be helpful (for the future) rather than punitive (for the past). While people typically feel unhappy about blame and good about credit, that attitude gets everything backwards and can cause major problems. Worrying about 'blame' and 'credit' or 'positive' and 'negative' feedback impedes the iterative process essential to learning,' Dalio writes.
Dalio teaches his employees to work at a level where there is a mutual understanding of what needs to be accomplished. One way to achieve this is by using conversations about a certain project as a means of reaching conclusions rather than just brainstorming.
He also believes that it is a manager's responsibility to weigh the value of coworkers' opinions. In the same way that you'd value golf advice from Tiger Woods over advice from a friend, Dalio writes, you should value the opinion of a worker with a proven track record over someone without one.
Before you begin a search for an employee, determine not just the job's qualifications, but which specific qualities you want in that hire.
And make sure that the person you are hiring naturally shares your values.
When considering a job candidate, Dalio places the most importance on values ('deep-seated beliefs that motivate behaviours'), then abilities ('ways of thinking and behaving'), and then skills ('learned tools'). He suggests finding a candidate who doesn't just want the job but wants to be part of the company.
'Don't hire people just to fit the first job they will do at Bridgewater; hire people you want to share your life with,' Dalio writes, adding that you should 'look for people who sparkle, not just 'another one of those.''
'Micromanaging is telling the people who work for you exactly what tasks to do and/or doing their tasks for them. Not managing is having them do their jobs without your oversight and involvement. Managing means: 1) understanding how well your people and designs are operating to achieve your goals, and 2) constantly improving them. To be successful, you need to manage,' Dalio says.
And to manage effectively, everyone needs to know what the team's long-term goals are and what individual employee's tasks are. Dalio says it's necessary to avoid the term 'we should,' since an objective should be concrete and assigned to a specific party.
'The main reason Bridgewater has improved at a much faster rate than most other companies over the past 30 years is that we seek out problems and find systematic ways of eliminating them,' Dalio writes.
He thinks that managers and their employees shouldn't pick their battles but fight them all, in the sense that they should never let even small problems float by without being addressed.
Don't assume that criticising your employees will harm them. Discuss their performance with them objectively, and do so in a way that results in a plan for improvement.
And don't wait for periodic evaluations to let them know how they're doing. 'Child psychologists, dog trainers, and other behaviour modification specialists will tell you that constant, no-exception feedback is fundamental to good training,' Dalio writes.
If you're telling an employee exactly what they need to do to complete a task, then you're either micromanaging or the employee is inept.
'So give people your thoughts on how they might approach their decisions or how and why you would operate in their shoes, but don't dictate to them. Almost all that you will be doing is constantly getting in sync about how they are doing things and exploring why,' Dalio says.
'People who repeatedly operated in a certain way probably will continue to operate that way because that behaviour reflects what they're like,' Dalio says. That means that if someone isn't clicking with their role, you're doing neither of you a favour by manipulating the role around their tendencies.
Consider whether they'd be a better fit elsewhere in the company, and if not, then it's probably best to fire them.
'To perceive problems, compare how the movie is unfolding relative to your script -- i.e., compare the actual operating of the machine and the outcomes it is producing to your visualisation of how it should operate and the outcomes you expected. As long as you have the visualisation of your expectations in mind to compare with the actual results, you will note the deviations so you can deal with them,' Dalio writes.
And when you get to the root of a problem, avoid generalizations. Use specific names and the specific ways they deviated from your expectations.
Don't treat problems as if they are one-time occurrences, Dalio says, since they're just the manifestation of a certain behaviour or bias. Work with your employee to find these roots so that the expectation of the mistake being repeated is then lowered.
Managers and their employees need to do a post-mortem on resolved problems and place them in the context of the past and the future. Place everything in the context of how you want your 'machine,' your team, to operate at its peak.
'An organisation is the opposite of a building -- the foundation is at the top,' Dalio says. The head of a company should determine their goals and find managers who can help them achieve them by assigning tasks to their direct reports.
These individual managers should also hire employees who share their own goals, which fall in line with the company's vision.
'You can make great things happen, but you must MAKE great things happen. Times will come when the choice will be to plod along normally or to push through to achieve the goal. The choice should be obvious,' Dalio writes.
'Successful people are great at asking the important questions and then finding the answers.
When faced with a problem, they first ask themselves if they know all the important questions about it; they are objective in assessing the probability that they have the answers; and they are good at open-mindedly seeking believable people to ask,' Dalio says.
Dalio approaches managing people the same way he manages investments. 'Recognise opportunities where there isn't much to lose and a lot to gain, even if the probability of the gain happening is low,' he writes.
Dalio says that leaders are able to determine the importance of the tasks in front of them and take care of the most important things first.
'Be an effective imperfectionist. Solutions that broadly work well (e.g., how people should contact each other in the event of crises) are generally better than highly specialised solutions (e.g., how each person should contact each other in the event of every conceivable crisis), especially in the early stages of a plan. There generally isn't much gained by lots of detail relative to a good broad solution,' Dalio writes.
Dalio recommends reflecting on the events of a day and then determining whether they exceeded your expectations, met them, or fell below them. Over a month (or any longer period of time) the frequency of met and exceeded expectations should be on an upward trajectory.
Dalio says that your decisions should be made with this trajectory in mind. 'Avoid the temptation to compromise on that which is uncompromisable,' and don't try to please everybody with every choice you make for the team.
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